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Zestimate Shmestimate

In 2005, Zillow.com burst upon the internet and real estate will likely never be the same again because of it. This website founded by two former Microsoft executives quickly rose in popularity and is now regularly ranked as one of the top 3 most visited real estate websites. What makes this site so popular? Simply put, Zillow offers homeowners and potential homeowners information. In real estate, nothing is more valuable than information. In the days before the internet, real estate information was for the most part the exclusive domain of real estate agents. If you wanted to know what homes were for sale you went to a Realtor. If you wanted to know what your neighbor’s house sold for you went to a Realtor. Today, getting this information is so easy even a child could do it with but a few clicks of the mouse. Zillow in particular is so popular among web surfers because it offers a massive amount of information presented in a clear way and it also offers many useful tools. Many of these tools I regard as merely entertainment like the “make me move feature” where a homeowner offers their home at a price that would well . . . make them move (usually some obscenely high number) and of course another popular tool is the dreaded Zestimate.

So what exactly is a Zestimate? I wish I could tell you. Zillow defines the Zestimate as: “Zillow’s estimated varket value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value.” If a Zestimate is a starting point and the true market value of a home is the finish line, then likely this race is a marathon and not a sprint because the distance between a Zestimate and actual market value is often vast. On Zillow’s own discussion forum there is thread after thread after thread asking “why is the Zestimate of my home so high/low?” This is such a common complaint that Zillow has devoted an entire page of their website to explaining the Zestimate and its accuracy (or lack thereof). The following comes from that page: “The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real-estate-related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home.” Wow! Here is a website placing a value on your home and putting it on the internet for the entire world to see and they’re not even sure the data behind it is correct. I’m just blown away by how irresponsible this is. Making information available to the public is one thing, but making incorrect information public is a totally different thing. How innaccurate is the Zestimate? Pretty bad! Here’s a chart I found on Zillow.com:

In Norfolk County alone, Zillow is more than 10% off on the market value of a home 49% of the time. They’re only within 5% of the value 26% of the time. If I had a track record like this no one would hire me yet Zillow is one of the three most visited real estate websites on the internet. Please take note by the way that Zillow gives Norfolk county their top rating (four stars) for Zestimate accuracy. While it would certainly be convenient to have a tool which accurately gauges the market value of a home, it seems that technology does not currently exist. If you are curious what your home would sell for, the best way to measure that is to call a local Realtor for a CMA (Comparative Market Analysis). What makes a CMA better than a Zestimate? Simply put, it’s the human elemant. A local Realtor knows the value of the location of your home. Assigning a location value for a computer to use for every home in the country would be an impossible task especially in the Boston area where one side of the street can often be considered more valuable than the other. Not only that but a Realtor will actually visit your home to see the floorplan, the condition, and the materials used in the home which along with knowledge of local market conditions can really have a large impact on the value of your home. I am by the way within 5% of the sales price with my CMA’s about 99% of the time.